Peak Oil & Supplies - September 9

Heinberg: Is peak oil "A Misleading Concept?"Richard Heinberg, Post Carbon Institute ... There is a veritable cottage industry of economists and statisticians (including Daniel Yergin, Bjorn Lomborg, Peter Huber, and Michael Lynch) who tirelessly implore their readers not to panic over oil prices because The Market will always come to the rescue. As easy conventional oil depletes, tar sands, oil shale, and biofuels become more economic to produce. Even coal-to-liquids becomes feasible on a large scale. And, as everyone knows, there is an endless amount of coal.

Another cottage industry (this one much less prominent in the mainstream media) composed largely of physicists and geologists rebuts this argument. These writers point out that what may seem "economically feasible" on the basis of a few calculations may not be so in fact: physical barriers may prevent low-grade hydrocarbon resources such as tar sands from yielding the flow rates of regular oil, regardless of petroleum’s barrel price; and anyway, because production of these alternative fuels entails high energy costs, their break-even cost point is a moving target: as the price of oil goes up, the cost of producing a barrel of oil from tar sands goes up too.

Further, the energy profit from these alternatives is much lower than that from conventional oil from the old super-giant fields, and net energy really matters. It takes energy to get energy, and what society really needs is not energy per se, but usable energy left over after subtracting the energy expended in efforts to gather energy. If net energy is a proportionally large segment of the total energy being produced from a given source, this means that only a relatively small portion of effort must be dedicated to energy production, and so most of the gross energy yielded is available for other purposes.

... Throwing more dollars at energy production solves nothing if the energy source has a low net payback—and the ones that Soros and the Yergin-Lomborg-Huber club point to are abysmal in this regard.

These latter commentators genuinely believe that conventional economic theory defines reality. Where there’s a buck to be made in doing what needs to be done, someone will do it, and resource depletion will never be a problem because of the principle of infinite substitutability.

But physical reality and economic theory part company in many instances, and Peak Oil defines one of the most important of these. Departing from reality sometimes has severe consequences.

I must return to that word "misleading." The economists are telling us we have nothing to worry about. Oil may get a bit more expensive, but there will always be plenty of liquid fuel to keep us going—to keep the planes flying, the tractors plowing, and the SUVs ferrying kids to soccer practice. If these people are wrong (and I strongly believe they are), they are not just "misleading" us conceptually; they are guiding us straight over a cliff. (8 September 2008)

They claim that climate change is overwhelmingly urgent (no arguments from me there) and so that the depletion of fossil fuels is largely irrelevant. In fact they argue that it can only be good news, limiting the availability of these dangerous substances which have the potential to destabilise our climate.

But this ignores the reason why humanity is so loathe to wean itself off these fuels in the first place. They are exceptionally potent energy sources which greatly increase our ability to change our human instructure and shape the world around us. Energy is perhaps best defined as the ability to do work, and there is much work to be done in the transition to a low-carbon way of life.

Imagine that we simply immediately ceased the extraction of fossil fuels - as the climate change imperative might appear to demand. We would see unbelievable human suffering as the lifeblood of our fossil fuel based societies dried up. Our critical infrastructure for food supply, transportation, heating, irrigation, electricity and so on would all fail catastrophically.

So there is clearly a tension between addressing climate change and addressing peak oil. The earlier we reach fossil fuel supply limits – whether geological or voluntary – the better for climate change, but the more painful the ‘peak oil’ adaptation problems, and the higher the oil price.

... It is these win-win solutions that climate change campaigners should be fighting for, and in fact they might well find that peak oil helps their cause.

Try as we might to ignore peak oil, the stark reality is that the world will be getting by on around half its current level of oil production in 20 years time. And like it or not, some who are unmoved by moral arguments on climate change become rather proactive when they recognise the reality of such a severe impending threat to their way of life.

Activists on peak oil and climate change should be indistinguishable - it really is one problem, and we all need to be working together to ensure that the motivation it generates is channelled in the most constructive directions. (14 June 2008)Highly recommended by peak oil writer Dave Cohen. He writes: Shaun gets the peak oil vs. climate change issue right, which is rare. When someone gets it right, they deserve a wider audience.

Rough seasJim Kingsdale, Seeking Alpha ... Bottom line: indeed, as a number of oil analysts who are better known than I have said previously, oil should become increasingly scarce after 2008, Peak in 2010, and become very scarce starting around 2013.

... Regardless of what may be the case in 2013 the price of oil can do anything in the short term. I’ve said that repeatedly over the past year. I said it when oil was $135 after I had predicted a 2008 range of $80 - $120. Now as oil has broken below the $111 “resistance” level and most likely will test the $100 psychological barrier let’s repeat together: the price of oil can do anything in the short term.

It can go to $80. To those who think OPEC will do something to support oil above $100 I suggest you consider the likelihood that the Saudis - the most powerful OPEC member - will be happy to drive oil down before the U.S. election if they think that will elect another Republican administration. They also would not be unhappy for a low oil price to put pressure on their Shiite neighbor, Iran.

What is far more likely to support oil above $100 in my opinion - if anything does - is a potential Russian action, perhaps against the NATO naval presence in the Black Sea, which they resent strongly. Russia - despite delivering a couple of warning shots over the bow of a few countries that have “misbehaved” - has been a remarkably dependable oil and gas supplier for Europe and the world. Consider that Russia would benefit financially from the higher oil prices that would result from their withdrawing some oil from the market. Despite their own self interest, they are not overtly withholding any oil from the market, it appears. They may be subtly keeping new Russian oil fields from being developed but their existing production in excess of domestic demand seems like it is being sold on the market. (7 September 2008)

Geopolitical disruptions #2: Identifying the feedback loopsJeff Vail, The Oil Drum This post, the second in a series on Geopolitical Feedback Loops (see part 1 here), will outline the various geopolitical feedback loops that operate to disrupt oil and resource production. I've tried to link most of these feedback loops around a common theme of ownership dispute, illustrated below. There are several examples for each feedback loop, but in the interest of time I've just listed them and linked to further information--each could be a post in its own right.

The report, Toyota’s Sustainability Report for 2008, echoes a July warning from Toyota’s coordinator for alternately fueled vehicles, Bill Reinert, that the world could hit what he reportedly called a “liquid peak” within a decade. Reinert’s warning, made in Portland, Ore., at a conference on sustainable cities that Toyota sponsored, was first reported on the website Green Car Congress, which noted that Toyota thinks a liquid peak could occur even if all available liquid fuels are produced at maximum capacity without concern for the impact on the environment. (9 September 2008)

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